Spiraling home values, soaring inflation and increased interest rates mean less buying power for all consumers. In other words, the house you can afford today may be out of reach tomorrow.
Increased housing prices
According to The National Association of Realtors (NAR), the median existing-home price for all housing types in August was $356,700, up 14.9 percent from August 2020 ($310,400).
In a recent article, Zillow forecasted a 11.7 percent appreciation in home values for 2022. That’s on top of a 17.7 percent increase in prices over the last 12 months.
Increasing interest rates translate into less buying power for buyers
Assuming the interest rates increase by one percent, here are the two concerns:
How much more you will pay in interest overall for the loan.
How much more you will need to qualify at a higher interest rate as opposed to purchasing now.
If the rates increase to 3.7 percent as predicted, the amount needed to qualify for a median priced home increases by roughly 10 percent, yet wages and salaries for private industry workers only rose 4.3 percent (annualized) over the six-month period ending June 2021.
Inflation rears its ugly head
The overall inflation rate has increased from 1.2 percent in October 2020 to 5.3 percent today.
Shrinking the qualified buyer pool translates into lower prices for sellers as well.
Due to the factors above, now may also be the best possible time for homeowners to sell due to surging prices outpacing the growth of wages, the increased interest rates making it harder for buyers to qualify, plus the inflationary pressures shrinking the buying power of everyone’s dollars.
Call us at (480) 205 2234 for your mortgage needs as you begin your search for your dream home.
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